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Small businesses still hugely exposed to FX swings: report

Thu, Feb 11, 2016 - 11:23 PM

[LONDON] Only 20-25 per cent of small and medium-sized British and French companies hedge their exposure to fluctuations in currency rates which can have a huge impact on their bottom lines, a report by banking research consultancy East & Partners showed on Thursday.

The numbers, seen by Reuters ahead of a new report's publication on Sunday, are based on responses from more than 4,400 businesses with turnovers of up to 100 million pounds or 100 million euros.

They show some 80-90 per cent of businesses with annual turnover exceeding 20 million euros use either option or forward contracts to cover themselves against foreign exchange risks. Currency movements can mean that future payments or revenues differ hugely to those written into annual budgets.

But for UK companies with revenues of less than 20 million pounds, that figure falls to less than a quarter, and for French peers to less than a fifth.

Both those figures are rising steadily, the report said, but still show the extent to which small businesses across Europe are exposed to large swings in the value of the euro, pound, yen and dollar like those seen in the past year.

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Another surge on Thursday, for example, means the yen has gained almost 9 per cent against the dollar since the start of February. "Clearly there is more sophistication in how corporates are dealing with these issues," said Simon Kleine, Head of Client Services with East and Partners Europe. "The trend in France is going in the same direction but clearly British firms, possibly just due to the focus on currency trading in London, are slightly further ahead." The report also showed a handful of French banks have a much stronger grip on the business currency market than their UK counterparts.

It listed BNP Paribas as controlling 22 per cent of the day-to-day spot market in currencies, followed by Credit Agricole (13.2 per cent), Credit Mutual (11.6 per cent) and Société Générale (8.2 per cent), measured in terms of primary customer relationships.

That compared to shares of 14.7 per cent, 13.6 per cent and 10.8 per cent for Barclays, HSBC and Lloyds in the United Kingdom.

REUTERS

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